Eternal Ltd Shares Surge 4%: JM Financial Sees 73% Upside

Introduction

Shares of Eternal Ltd, the parent company of Zomato and Blinkit, gained for the second consecutive session on Tuesday, climbing as much as 4.2% to a day's high of ₹231.35 on the BSE. This upward movement provides a significant breather for the stock, which had experienced a sharp correction, falling nearly 25% over the last 24 trading sessions. The rally was primarily fueled by a positive outlook from brokerage firm JM Financial, which identified the recent sell-off as a compelling buying opportunity for investors.

The Brokerage's Bullish Stance

JM Financial has maintained its 'Buy' rating on Eternal Ltd, holding a firm target price of ₹400 per share. This target suggests a potential upside of approximately 73% from the stock's high on Tuesday. The brokerage advises investors with a 12 to 18-month investment horizon to "aggressively accumulate" the stock at its current levels. This confidence stems from a detailed analysis of Eternal's core businesses, particularly its quick-commerce arm, Blinkit, which the firm believes is structurally positioned for sustained growth.

Blinkit: The Engine of Growth

According to JM Financial, Blinkit's competitive advantage is a key factor in its optimistic forecast. The platform boasts the industry's most mature supply chain, supported by a network of 2,027 dark stores. This extensive infrastructure allows for efficient operations and strong customer retention without a heavy reliance on promotional discounts. The brokerage projects that Blinkit is on track to deliver around 80% growth in its gross order value (GOV) for the financial year 2027, driven by a continued shift in consumer behavior from traditional e-commerce and offline retail to quick commerce.

Food Delivery Business Remains Resilient

While concerns have emerged regarding potential disruptions in the food delivery (FD) segment due to gas supply issues linked to Middle East tensions, JM Financial believes these fears are likely overstated. The firm's analysis indicates that the business can withstand moderate shocks. It maintains a net order value (NOV) growth forecast of 18% year-on-year for the fourth quarter of FY26, which would be the highest in the last seven quarters. Even in a scenario where 25% of orders are disrupted in the final weeks of the quarter, the segment is still projected to achieve a respectable 15% year-on-year growth.

Valuation and Market Context

JM Financial's valuation reflects a long-term perspective. While the brokerage has adjusted its target next-twelve-months (NTM) price-to-earnings (PE) multiple down to 65x from 75x to account for global macroeconomic risks and competitive pressures, the target price of ₹400 remains unchanged due to a rollover to March 2027 earnings estimates. The recent stock correction was attributed to investor concerns around leadership changes, high competitive intensity in quick commerce, and broader global uncertainties. However, the brokerage believes Eternal, and especially Blinkit, will emerge stronger as macroeconomic conditions normalize.

Analyst Consensus and Investment Thesis

The positive sentiment from JM Financial aligns with a broader consensus among market analysts. Out of 33 analysts covering Eternal Ltd, 29 have issued a 'Buy' recommendation. The investment thesis is built on the company's market leadership across its business-to-consumer verticals, superior unit economics, and a healthy balance sheet that allows for continued investment in growth. Despite near-term volatility and increased competition, the structural shift towards online food and grocery delivery is expected to provide a long-term tailwind for the company.

Conclusion

The recent 4.2% surge in Eternal Ltd's shares, following a period of significant decline, highlights investor confidence spurred by JM Financial's reaffirmation of its 'Buy' rating. The brokerage's ₹400 price target points to substantial upside potential, underpinned by the robust growth prospects of Blinkit and the steady performance of the food delivery business. While competitive and macroeconomic risks persist, the firm's analysis suggests that Eternal is well-positioned to navigate these challenges and deliver significant value to investors over the medium to long term.